[Federal Register Volume 68, Number 26 (Friday, February 7, 2003)]
[Notices]
[Pages 6446-6448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3113]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL02-88-000, et al.]


Before Commissioners: Pat Wood, III, Chairman; William L. Massey, 
and Nora Mead Brownell; Pacific Gas and Electric Company et al.; Order 
Partially and Fully Granting Rehearings and Partially Granting 
Complaints

Issued January 29, 2003.
    In the matter of: ER02-1330-002, EL02-88-000, EL03-3-000 and 
ER02-1472-001, EL03-4-000 and ER02-1151-001, EL03-5-000 and ER02-
1069-001, EL03-13-000 and ER02-2243-002, EL03-12-000; Pacific Gas 
and Electric Company, Wrightsville Power Facility, LLC v. Entergy 
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Services, Inc., 
Entergy Services, Inc., Kinder Morgan Michigan, LLC v. Michigan 
Electric Transmission Company, LLC; Order Partially and Fully 
Granting Rehearings and Partially Granting Complaints.

    1. In this order, we partially and fully grant the requests for 
rehearing and partially grant the complaints in the above-captioned 
proceedings and hold that the interconnection agreements (IAs) in these 
dockets must be modified to conform with our recent decision in Duke 
Hinds II.\1\ Our holdings here benefit the public interest by assuring 
that the rates, terms, and conditions for interconnection service are 
just and reasonable, and provide the parties with a reasonable means to 
ensure the reliable operation, protection, and integrity of their 
transmission systems.
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    \1\ Entergy Services, Inc., EL02-107-000, et al. (January 28, 
2003) (Duke Hinds II).
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    2. More specifically, we partially grant rehearing in Pacific Gas 
and Electric Company \2\ (Docket No. ER02-1330-002) and find that the 
IA in this docket is unjust and unreasonable. We also partially grant 
the rehearings in Entergy Gulf States, Inc.\3\ (Docket No. ER02-1472-
001); Entergy Services, Inc.\4\ (Docket No. ER02-1151-001); Entergy 
Services, Inc.\5\ (Docket No. ER02-1069-001); and fully grant the 
rehearing in Entergy Services, Inc.\6\ (Docket No. ER02-2243-002) and 
find that the IAs

[[Page 6447]]

in these dockets are unjust and unreasonable under section 206 of the 
Federal Power Act (FPA).\7\ We also partially grant the complaints 
filed by Wrightsville Power Facility, L.L.C. (Wrightsville Power) in 
Docket No. EL02-88-000 and by Kinder Morgan Michigan, LLC (Kinder 
Morgan) in Docket No. EL03-12-000.\8\ In each of these cases, we direct 
modification to the respective IAs.
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    \2\ 101 FERC ] 61,079 (2002) (PG&E).
    \3\ 99 FERC ] 61,234 (2002).
    \4\ 99 FERC ] 61,097 (2002).
    \5\ 99 FERC ] 61,077 (2002).
    \6\ 100 FERC ] 61,397 (2002).
    \7\ 16 U.S.C. 824e (2000).
    \8\ We note that although we are partially granting most of the 
requests for rehearing and the complaints in the above captioned 
dockets, we plan to address the other issues raised in these 
proceedings, that are not addressed in this order, at a later date.
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Background

    3. On March 15, 2002, the Commission issued an order in Duke Hinds 
I.\9\ In that proceeding, Entergy, the transmission provider, had filed 
a revision to an unexecuted IA to reflect Duke's, the generator's, 
election of certain additional upgrades that were not included in the 
original, executed IA, which had been previously accepted by the 
Commission. The Commission accepted the revisions, stating that, once 
the Commission accepts an IA, where the interconnecting generator 
assumed the responsibility, without protest, ``to pay, on a direct 
assignment basis without credit, for certain facilities,'' the 
generator is ``bound to the terms and conditions of the [original 
interconnection agreement] into which it willingly entered.'' \10\ 
Further, the Commission stated that it ``can act on behalf of a party 
to revise terms and conditions to which the parties have agreed and 
which the Commission has accepted, only if it finds that the contract 
is contrary to the public interest under Section 206 [of the FPA].'' 
\11\
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    \9\ Entergy Services, Inc., 98 FERC ] 61,290 at 62,261-62 (2002) 
(Duke Hinds I).
    \10\ Id.
    \11\ Id. at ] 62,262.
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    4. Duke sought rehearing and filed a complaint, pointing to 
language in the IA which specifically reserved the parties' rights to 
request changes to the IA under section 205 \12\ or 206 of the FPA.
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    \12\ 16 U.S.C. 824d (2000).
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    5. On January 28, 2003, the Commission issued Duke Hinds II. In 
Duke Hinds II, the Commission agreed with Duke that the revised IA was 
subject to review under a just and reasonable standard because the 
agreement contained provisions that allowed either party unilaterally 
to request changes to the IA under section 205 or 206 of the FPA. 
Further, the Commission found that the more stringent public interest 
\13\ standard of review was not the appropriate standard of review; in 
Duke Hinds I, the Commission had ``failed to recognize * * * the 
existence of specific provisions [in the interconnection agreement] 
preserving [the generator's] statutory right to file a complaint under 
section 206 and have the Commission revise the [IA] if we find [it] to 
be unjust and unreasonable.'' \14\ The Commission then directed Entergy 
to revise its interconnection agreement to reclassify certain 
facilities as network upgrades and to provide the generator with 
transmission credits, plus interest, for the costs associated with 
those facilities, consistent with long-held Commission policy.\15\
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    \13\ See United Gas Pipe Line Co. v. Mobile Gas Service Corp., 
350 U.S. 332 (1956) (Mobile), and FPC v. Sierra Pacific Power Co., 
350 U.S. 348 (1956) (Sierra). Under the Mobile-Sierra doctrine, 
where the Commission has accepted a contract that contains a 
provision precluding changes to that contract, the Commission can 
act on behalf of a party to revise terms and conditions only if the 
Commission finds that the contract is contrary to the public 
interest, under section 206 of the FPA.
    \14\ Duke Hinds II, slip op. at P 21. See also Papago Tribal 
Utility Authority v. Federal Energy Regulatory Commission, 723 F.2d 
950, 954 (DC Cir. 1983).
    \15\ See Consumers Energy Company (Consumers) 95 FERC ] 61,233 
at 61,804 (2001); reh'g denied, 96 FERC ] 61,132 at 61,561 (2001) 
(holding that all network upgrade costs should be credited back to 
the customer that funded the upgrades once delivery service begins). 
American Electric Power Service Corp., 91 FERC ] 61,308 at 62,051 
(2000), order denying reh'g and granting clarification, 94 FERC ] 
61,166 (2001), order dismissing request for clarification, 95 FERC ] 
61,130 (2001), appeal docketed sub nom. Tenaska, Inc. v. FERC, No. 
01-1194 (DC Cir. April 23, 2001) (AEP) (stating the Commission's 
policy on crediting and interest on credits).
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Discussion

    6. We will grant the above-captioned requests for rehearing and 
complaints. All of these IAs involve crediting issues that are 
inconsistent with Commission Policy. Further, each of the respective 
Commission-accepted IAs contain language, similar to the language found 
in the Duke Hinds II IA, preserving the rights of the parties to 
unilaterally seek revisions to their agreements, under sections 205 and 
206 of the FPA. Thus, the Commission should evaluate these IAs under 
the just and reasonable, and not public interest, standard.

1. PG&E

    7. In Pacific Gas and Electric Company \16\ (Docket No. ER02-1330-
002), the Commission conditionally accepted for filing, as modified, 
several executed agreements, to be effective May 17, 2002, relating to 
the interconnection of PG&E's transmission system and Los Medanos 
Energy Center LLC (LMEC), subject to the outcome of any future 
Commission action in the Duke Hinds I rehearing and complaint 
proceedings. We will now partially grant rehearing with respect to this 
issue and establish a May 17, 2002 refund effective date, the date the 
agreements became effective. Specifically, we find that because the 
agreements at issue contain provisions \17\ that allow either party 
unilaterally to request changes to them under section 205 or 206 of the 
FPA, the just and reasonable standard applies, consistent with Duke 
Hinds II, and thus the agreements must be modified to be consistent 
with Commission policy. We will direct PG&E to file such modifications 
within 30 days of the date of this order.
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    \16\ 101 FERC ] 61,079 (2002) (Docket Nos. ER02-1330-000; ER02-
1330-001).
    \17\ Paragraph 11 of the Supplemental Letter Agreement (SLA) to 
the IAs states that, ``notwithstanding any other provisions of the 
SLA, GSFA, or the GIA, PG&E and [LMEC] retain their full and 
respective rights under Sections 205 and 206 of the [FPA] to file to 
change or challenge any rate, term or condition in any agreement 
between them related to LMEC that is or may be on file with the 
[Commission.]'' See also Paragraph 5(a) of the SLA.
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2. Other IA-Related Rehearing Requests

    8. In addition, we have reviewed the IAs, and their corresponding 
pending requests for rehearing, in other proceedings and partially and 
fully grant those rehearings. Because the IAs at issue also contain 
provisions that allow either party unilaterally to request changes to 
them under section 205 or 206 of the FPA, the just and reasonable 
standard applies, consistent with Duke Hinds II. We find that these 
agreements must be modified to be consistent with Commission policy. 
Specifically, in this regard, we partially grant the requests for 
rehearing in Entergy Gulf States, Inc. (in Docket No. ER02-1472-001); 
Entergy Services, Inc. (in Docket No. ER02-1151-001); Entergy Services, 
Inc. (in Docket No. ER02-1069-001); and fully grant the request for 
rehearing in Entergy Services, Inc. (in Docket No. ER02-2243-002).
    9. Accordingly, pursuant to Section 206 of the FPA, the Commission 
will direct modification to the IAs in those proceedings, in accordance 
with our ruling in Duke Hinds II and Commission policy, within 30 days 
of the date of this order.
    10. In order to give maximum protection to customers, we will 
establish the refund date at the earliest date allowed. Accordingly, we 
will direct the Secretary to publish this order in the Federal Register 
and, for Docket Nos. EL03-3-000 and ER02-1472-001; EL03-4-000 and ER02-
1151-001;

[[Page 6448]]

EL03-5-000 and ER02-1069-001; EL03-13-000 and ER02-2243-002, the refund 
effective date will be 60 days from the date on which this order is 
published in the Federal Register.

3. Other IA-Related Complaints

    11. We will also partially grant the complaints filed by 
Wrightsville Power Facility, L.L.C. (Wrightsville Power) in Docket No. 
EL02-88-000 and by Kinder Morgan Michigan, LLC (Kinder Morgan) in 
Docket No. EL03-12-000. We find that, because the agreements at issue 
contain provisions that allow either party unilaterally to request 
changes to them under section 205 or 206 of the FPA, the just and 
reasonable standard applies, consistent with Duke Hinds II, and thus 
the agreements must be modified to be consistent with Commission 
policy. Accordingly, we will direct modifications to the IAs in these 
proceedings within 30 days of the date of this order.
    12. In order to give maximum protection to consumers, we will 
establish the refund date at the earliest date allowed. For Docket No. 
EL02-88-000, because Wrightsville Power filed a complaint on its own 
motion, we will establish the refund date as July 19, 2002, 60 days 
after it filed the complaint. For Docket No. EL03-12-000, because 
Kinder Morgan filed a complaint on its own motion, we will establish 
the refund date as December 16, 2002, 60 days after it filed the 
complaint.
    The Commission orders:
    (A) The requests for rehearing in Docket Nos. ER02-1330-002, ER02-
1472-001, ER02-1151-001, and ER02-1069-001 are hereby partially 
granted, as discussed in the body of this order.
    (B) The request for rehearing in Docket No. ER02-2243-002 is hereby 
granted.
    (C) The complaints filed by Wrightsville Power Facility, L.L.C. 
(Wrightsville Power) in Docket No. EL02-88-000 and by Kinder Morgan 
Michigan, LLC (Kinder Morgan) in Docket No. EL03-12-000 are hereby 
partially granted, as discussed in the body of this order.
    (D) The transmission providers in the instant dockets are hereby 
directed to modify their IAs, as discussed in the body of this order, 
within 30 days of the date of this order.
    (E) The Secretary shall promptly publish this order in the Federal 
Register.
    (F) This order is hereby effective as discussed in the body of this 
order.

    By the Commission.
Magalie R. Salas,
Secretary.
[FR Doc. 03-3113 Filed 2-6-03; 8:45 am]
BILLING CODE 6717-01-P